On Friday, the December payrolls figure will offer more clues about the strength of the labor market, but Societe Generale’s Aneta Markowska is already predicting that U.S. unemployment could fall below 6.5% well before the market–or the Fed–expects it. She writes:

Our scenario suggests that the major unemployment milestones will be reached about six months ahead of schedule. This is likely to put significant pressure on the Fed’s exit timeline. First, we expect that tapering will eventually be accelerated from the current pace of a $10bn reduction at each meeting. This would bring asset purchases to an end by late summer/early fall, a few months ahead of the planned year-end conclusion of the program. More importantly, forward guidance will come under significant pressure in this scenario, with rates being pushed higher, particularly in the belly of the curve…

In our central scenario, the Fed will fall behind the curve by resisting better data. All else being equal, we view this as negative for rates, but positive for equities and eventually bullish for the dollar.

Strategas Research Partners’ Don Rissmiller, meanwhile,warns that it doesn’t take high inflation to have an inflation scare. He writes:

Inflation is not a problem currently. The U.S. core consumption price deflator, which the Fed watches, is up just 1.1% y/y through November…Put another way, the current problem is not inflation itself, since the CPI and other inflation indices are low. But the problem could be the market’s (over)reaction to perceptions of changes in fiscal and monetary policy: the Fed is comfortable if the price direction is up, and up quicker. Couple this with ebbing fiscal drag (in the U.S. and Europe), and there’s the possibility of (over)- extrapolation.

HSBC’s Gary Evans suspects tighter monetary policy won’t be good for US stocks. He explains why:

Global equities initially shrugged off the start of Fed tapering. But, as the Fed continues to cut asset purchases this year and markets start to anticipate the first rate rise in 2015, we think this will present a headwind for equities, particularly in the US.

At the least, it means that the bull market can no longer continue purely on the back of multiple expansion…With earnings key, we favour countries and sectors with the greatest potential for upside surprises. So we cut the US to underweight because earnings are near record highs, valuations look stretched relative to the rest of the world, and the Fed is moving towards ending monetary easing more quickly than other developed-market central banks.

And judging from the looks of it, the market may be worrying about the same thing.

About Stocks To Watch

Earnings reports, corporate strategies and analyst insights are all part of what moves stocks, and they’re all covered by the Stocks to Watch blog. We also look at macro issues, investor sentiments and hidden trends that are affecting the market. Stocks to Watch gives you the full picture of the U.S. stock markets, all day long.

The blog is written by Ben Levisohn, a former stock trader who has covered financial markets for the Wall Street Journal, Bloomberg and BusinessWeek.